With a well-paying job in one of China’s wealthiest cities, Chen Xiaoyu decided it was time to get married this year. However, starting a family is not on her agenda.
“If possible, I would want to get sterilized,” said Chen, 29, who works at a hospital office in Shanghai. “The financial pressure is unimaginable. I just couldn’t afford the cost of raising a child on top of housing loans.”
China’s once-in-a-decade census, released on Tuesday, shows that amid the uncertainties of the coronavirus pandemic, the number of births nationwide has fallen to the lowest level since 1961, when the country was struggling following a nationwide famine that killed tens of millions of people.
Illustration: Kevin Sheu
The views of women such as Chen — and the experiences of other North Asian economies, such as Taiwan, Japan, South Korea and Hong Kong — suggest there is little prospect of changing that trend. As a result, China’s total population could peak in the next few years, spurring profound changes for the world’s second-largest economy.
To ensure that economic growth does not slow along with the population drag, the government in Beijing will need to undertake a challenging shift in its growth model, rapidly increasing spending on pensions and healthcare while maintaining a high level of corporate and state investment in order to upgrade its vast industrial sector.
A successful transition would mean that China could become the world’s largest economy, continuing to propel global demand for commodities in the coming decades, while its aging consumers become a vast market for multinationals, with their huge pool of pension savings targeted by global financial companies. A failed response could mean China never eclipses the US, or does so only fleetingly.
“They have been plotting their whole growth strategy to be congruent with demographic change,” said Lauren Johnston, a China economics and demography expert at SOAS University of London. “China’s role as the labor-intensive factory of the world has to go. They have to move to capital-intensive growth.”
Beijing has a two-pronged approach to maintaining economic growth as China’s population shrinks. First, it intends to slow the decline of the urban workforce by raising the retirement age and encouraging greater migration of the country’s 510 million rural residents to cities. Second, it plans to raise productivity, with the latest five-year plan emphasizing better vocational education and more investment in scientific research, automation and digital infrastructure.
China’s government has been preparing for a decline in the population since the 1970s, when rising levels of education and work participation among women resulted in smaller family sizes, a trend accelerated by its imposition of a “one child” policy for most families due to fears of resource shortages. The birth rate has continued to decline even after China eased some restrictions on family size in 2016, suggesting further relaxation of the policy would have little impact as social norms have shifted.
Because it is betting on productivity gains, China’s government is not expected to launch an all-out effort to raise the birthrate.
“It’s oversimplified to think they will have very pro-natalist policy,” said Stuart Gietel-Basten, director of the Center for Aging Science at the Hong Kong University of Science and Technology.
China will need to defy a regional trend, where declining fertility rates have tended to coincide with slow or stagnant economic growth. Taiwan and South Korea saw their populations drop for the first time last year, following years of declining birth rates. Japan’s population peaked a decade ago.
While European countries and the US have been more willing to increase the number of foreign-born workers, China is more likely to follow East Asian neighbors by tightly controlling immigration.
Some argue that China’s problem is more severe than researchers state, as it is facing a demographic transition before it has attained developed-world levels of income. It will be “old before rich,” the saying goes.
However, the problem is being countered due to rising education levels that are expected to make the population more productive, Johnson says.
Nearly 9 million Chinese people graduated from university last year, up from 1 million in 2000.
“China’s younger people are much, much more educated than older people,” she said. “Whereas in Japan the elderly are professionals, in China they are not losing the level of human capital that the ‘old after rich’ countries are.”
The government plans to gradually raise the retirement age from the current levels of 60 years for men and 50 for women, and will attempt in the next five years to move 50 million people from rural to urban areas to take up service and manufacturing jobs with higher wages.
BNP Paribas Asset Management economist Chi Lo estimates that a universal retirement age of 65 and loosening of internal migration restrictions could add at least 150 million workers in urban areas by 2035.
As a result, “the population peaking doesn’t make much of a difference in the next 10-15 years,” he said.
Drafting the right policies is one thing, but implementing them is likely to be tough. There has already been an online backlash to a retirement age hike, while there are likely to be severe challenges to meeting pension expenditures.
The Chinese Academy of Social Sciences, a government think tank, has estimated that at the current trend, the main urban pension fund is likely to run out by 2035. The balance in 2019 was 4.3 trillion yuan (US$669 billion).
Beijing is betting on selling off its assets to help plug the gap. State-owned companies transferred 1.68 trillion yuan of shares to state pension funds between 2018 and last year, representing a small proportion of their total assets, which were last reported to be 234 trillion yuan.
Adding to fiscal pressures, Beijing will need to make pensions more generous to maintain economic growth.
Cai Fang (蔡方), a renowned population economist who was recently appointed to the central bank’s monetary policy committee, has warned of a possible threat to the economy from the “demand-side” effects of aging.
As pensions are lower than wages and the elderly spend less on childcare, retired people tend to spend less than working-age people. Cai says that this raises the potential for deflationary forces, which have been seen in Japan, as demand for new goods and services falls short of production, discouraging new investment.
The answer is to increase government spending to supplement the incomes of the hundreds of millions of people who are most likely to spend — pensioners, rural residents above the country’s poverty line, and migrant workers, Cai said in a speech last month.
Doing that would double the size of the country’s middle class.
This could be “China’s new advantage in international competition,” he said.
Health spending would need to rise too, almost certainly requiring tax increases on working-age people, a politically difficult task.
Wang Feng (王豐), an expert on Chinese demographics at the University of California Irvine, estimates that if China increases pension, healthcare and education provision to levels similar to those seen in developed countries a decade ago, spending on those programs will increase to 20 percent of GDP by 2030. That is more than the 17 percent of GDP the government currently receives through taxes, meaning such spending would consume all of the state’s fiscal revenues.
“China’s economy will continue to expand, and population aging brings new opportunities,” Wang said. “But in terms of state fiscal obligations, the prospect will become increasingly concerning. The government can of course increase taxes, and it will have to, but it is not always easy. There will be a ‘stress test’ for the government.”
China could also try to spur birth rates by subsidizing childcare or housing to lower parenting costs, and crack down on workplace discrimination against women.
Though beneficial to women, such changes are unlikely to lead to a dramatic change in trends, demographers said. As in East Asia and Europe, preferences have shifted.
Tian Lijun, a 30-year-old flower shop owner in Beijing, said she valued freedom above having children.
“I’m living a very happy life, going wherever I want and working however late I want,” she said. “Having a child is so exhausting and it will surely bring down the quality of my lifestyle.”
Elon Musk, the CEO of Tesla and SpaceX, was “amazed” and “enthralled” by Chinese who rise at 3am for work. He praised it as a manifestation of talent and a good work ethic. Truthfully, that praise and statement about China, no matter its motivation, is nothing more than a round of applause for the atrocities inflicted by dictators and the spiritual anesthesia of their victims. “There’s just a lot of super-talented, hard-working people in China that strongly believe in manufacturing,” Musk said in an interview with the Financial Times on Tuesday. “And they won’t just be burning the midnight oil, they’ll be
Ever since the dissolution of the Soviet Union, the Chinese Communist Party (CCP) has lived in a constant state of fear that it might share the fate of its former mentor and ideological bedfellow. To stay in power, the party had to strike a difficult balancing act: maintaining a tight grip on information, while simultaneously opening up to the world under the program of economic reform initiated by former Chinese leader Deng Xiaoping (鄧小平). The balancing act became increasingly difficult with the popularization of the Internet in the mid-1990s. The CCP could not block Chinese citizens from accessing the Internet, as
“There’s going to be a new world order out there, and we’ve got to lead it,” US President Joe Biden said after Russia’s invasion of Ukraine upended global geopolitics. Far from Earth, that transition is already happening. Just like in the era of Sputnik and Apollo more than half a century ago, world leaders are again racing to achieve dominance in outer space — but there is one big difference: Whereas the US and the Soviet Union hashed out a common set of rules at the UN, this time around the world’s top superpowers cannot even agree on basic principles to govern
With a Taiwan contingency increasingly more plausible, Taiwanese lobbies in Japan are calling for the government to pass a version of the Taiwan Relations Act (TRA), emulating the US precedent. Such a measure would surely enable Tokyo to make formal and regular contact with Taipei for dialogue, consultation, policy coordination and planning in military security. This would fill the missing link of the trilateral US-Japan-Taiwan security ties, rendering a US military defense of Taiwan more feasible through the support of the US-Japan alliance. Yet, particular caution should be exercised, as Beijing would probably view the move as a serious challenge to